Capitalism Can’t Give Us Affordable Housing

Under capitalism, housing provision is based on what will make developers, lenders, and landlords rich — not what average people need to survive. That’s why we’ll never get decent, affordable housing for everyone under the free market.

An interior view of a model luxury condominium in April 2008 in New York City. Amy Sussman / Getty

The rallying cry “the rent is too damn high!” animates much of the popular and policy discourse around the twenty-first-century housing crises from San Francisco to Shanghai, Lagos to London. As a resident of the Bay Area, I can personally confirm that, indeed, the rent is too damn high.

While it makes for a good slogan, it opens up a potential pitfall. Liberal politicians and “new urbanist” think tanks promise to solve the problem of the too-damn-high rent with technocratic solutions that they say will lower or stabilize the steep rise in rents. They circulate policy papers and blog posts, debating supply and demand, inclusionary zoning, and tax incentives. And many working people in hyperinflated urban rental markets see these technical tweaks as the only available options for alleviating our housing crisis.

Socialists have to make the case, loudly, publicly, and globally: capitalism can never meet our needs for high-quality, affordable housing. The reason is straightforward: the profit motive.

In a capitalist society, land and housing stock are treated as commodities, basic goods and services that can be bought, rented, and sold for a profit. And like all commodities under capitalism, it is the profit motive that rules the production and maintenance of housing.

Profit is the lifeblood of the capitalist system. Karl Marx described the process of capital accumulation using the letters M-C-M’, or Money-Commodity-More Money. This abstract formula points us to a really important conclusion. The purpose of capitalist production and exchange is not to create commodities; commodities are only a means to achieve more money than a capitalist began with.

In other words, capitalists don’t stay in business based on the quality or quantity of the commodity they produce — they stay in business based on whether they turn a profit.

What does this mean for housing? Creating and maintaining housing is decidedly not the primary goal of developers, construction firms, mortgage lenders, and landlords. Housing is just a convenient medium through which capital can reproduce itself — through which these developers, construction firms, lenders, and landlords can make more money.

While socialists challenge the profit motive in consumer and industrial production, from cars and computers to steel and soybeans, it is just as important that we challenge the profit motive in the realm of what’s called “social reproduction.”

Social reproduction encompasses the activities and services (like housing, health care, childcare, elder care, education, etc.) that are necessary to maintain the existence of a productive working class. This realm of human labor has been historically unpaid or underpaid, and its burdens have tended to fall on working-class women.

Under neoliberalism, the privatization and commodification of social reproduction, expanding the free market into that realm of care work, has been a primary capitalist growth strategy. The expansion of charter schools, the selling off of water systems and other basic infrastructure, the huge rise of college tuition, “public-private partnerships” for basic services, for-profit elder care, and the rise of 401(k) retirement plans are just a few examples of this dynamic.

The hyper-financialization of home mortgages in the mid-2000s is perhaps the most dramatic example of how treating housing like a speculative commodity can spiral out of control, grotesquely distorting the provision of a basic necessity.

After the 2007–2008 financial crash, many liberal capitalists argued that better regulations on the secondary mortgage market might have prevented the worst aspects of the crisis. There might even be good reason to welcome such regulations. But the constant oscillations of housing prices will never disappear under capitalism, because these boom-bust cycles are inherent to any kind of capitalist commodity.

In this sense, gentrification and white flight are two sides of the same coin. Instead of fighting each phase of the commodity cycle on its own terms, we should address the system of commodified housing that lies at its root.

It will never be as profitable to construct or lease housing stock intended for poor and working-class people as it will be for the high end of the market.

When housing prices fall, there is little incentive for landlords to deliver the proper upkeep and maintenance on rental stock, and many working-class homeowners find themselves underwater, meaning they owe more on their mortgage than their home is worth on the market. Moreover, local governments that rely on property taxes to fund social services are forced to slash them when they are needed most. Public schools, employment programs, and health care in these communities — all funded by those property taxes — suffer, resulting in even lower property values and further disinvestment.

When housing prices rise — like the bubble we are currently experiencing in the urban areas in countries like the United States — working-class people have their bank accounts squeezed, are displaced from their homes, and subjected to intensified policing. And in such an upswing, the profit motive acts as a powerful limiting factor in a capitalist society’s ability to meet our housing needs. It will never be as profitable to construct or lease housing stock intended for poor and working-class people as it will be for the high end of the market.

Investors, mortgage bankers, developers, and landlords don’t screw over working-class tenants and homeowners just because capitalists are mean people (though many of them are). It’s because if they don’t continually accumulate profit and reinvest it, then they will be thrown out of business.

This tension is ratcheted up in urban areas where land prices are particularly high. Why would a private housing developer purchase an expensive one-bedroom rental in San Francisco, then rent it at the “below-market” rate of $1,130 per month when the median rent for a one-bedroom is almost $3,300 per month? That’s just bad business sense.

Investors, mortgage bankers, developers, and landlords don’t screw over working-class tenants and homeowners just because capitalists are mean people (though many of them are). It’s because if they don’t continually accumulate profit and reinvest it, then they will be thrown out of business . Even if they wanted to, landlords, developers, and investors can’t afford to look out for the best interests of poor and working-class tenants in a cutthroat urban housing market filled with other capitalists looking to edge them out.

The high cost of land in urban areas is one of the primary reasons that we can’t “build our way out” of the current crisis by slashing regulations and giving huge tax breaks to private developers, like a lot of liberals and conservatives claim. The only way for developers to make good profits in this circumstance is to invest in high-end housing whose sale or rents will make them profits beyond the massive costs of land, materials, and labor for construction. The only way to engineer affordability in this kind of housing market is for governments to heavily subsidize capitalist developers and landlords. Wouldn’t it just make more sense for governments to cut out the middleman and construct or finance that housing themselves, pledging to provide it at affordable rates to anyone who wants it?

This kind of publicly built and publicly run “social housing” is far superior to the privately owned and publicly subsidized “affordable” housing. That subsidized housing will also be confronted by the pressures of the profit motive. These developments will be less likely to undergo proper maintenance, and if the underlying land continues to rise in value, there will be pressure to convert those units to market-rate rent or sell them off as condominiums.

Since the 1970s, private developers have constructed more than three million affordable units using public financing from HUD and the Low-Income Housing Tax Credit. But because many of the affordability requirements tied to that financing expire after fifteen years, over 350,000 of those units have been converted to “market-rate” housing since 1995. And the National Low Income Housing Coalition estimates that we lose about 15,000 affordable units per year to market-rate conversion, a number that will only continue to accelerate as the cost of housing rises in urban areas.

Socialists should avoid the “not in my backyard” (NIMBY) trap of opposing new housing construction on the grounds of ruining homeowners’ nice views or “changing the character’ of the neighborhood. This is especially important given our project of building massive amounts of beautiful social housing in dense, livable urban neighborhoods.

But we also need to steer clear of a noxious “yes in my backyard” (YIMBY)-ism which insists that capitalist developers would love to provide us with abundant, secure, and affordable housing if only we allowed them to build more. Many zoning regulations are stupid and not broadly conducive to healthy and sustainable urban space, but we shouldn’t buy the argument that places technical zoning legislation at the root of our housing crises. The actual root is capitalism.

The capitalist class, through its monopoly on investment, is holding our society hostage over basic human needs like housing. Our society has the resources to produce stable, secure, and free or nearly free shelter for all. Capitalists refuse to meet this human need because it will never make them the profits they require to stay in business.

We have to demand massive investment in democratically planned and maintained social housing. Capitalist housing developers will never do it. We’ll have to take their ill-gotten gains — through taxing them and all the other obscenely wealthy people in our society — and do it ourselves.

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The rallying cry “the rent is too damn high!” animates much of the popular and policy discourse around the twenty-first-century housing crises from San Francisco to Shanghai, Lagos to London. As a resident of the Bay Area, I can personally confirm that, indeed, the rent is too damn high. While it makes for a good […]

The rallying cry “the rent is too damn high!” animates much of the popular and policy discourse around the twenty-first-century housing crises from San Francisco to Shanghai, Lagos to London. As a resident of the Bay Area, I can personally confirm that, indeed, the rent is too damn high. While it makes for a good […]

The rallying cry “the rent is too damn high!” animates much of the popular and policy discourse around the twenty-first-century housing crises from San Francisco to Shanghai, Lagos to London. As a resident of the Bay Area, I can personally confirm that, indeed, the rent is too damn high. While it makes for a good […]